Coronavirus Aid, Relief, and Economic Security (CARES) Act (Public Law 116-136)

Policy Details

Policy Details

Originating Entity
Last Action
Signed into law by the President
Date of Last Action
Mar 27 2020
Congressional Session
116th Congress
Date Introduced
Mar 25 2020
Publication Date
Apr 3 2020

SciPol Summary


The Coronavirus Aid, Relief and Economic Security (CARES) Act (Public Law 116-136; originally introduced as Senate Amendment 1578 to amend HR 748) constitutes the third major response measure from Congress to address the impacts of the 2020 coronavirus pandemic. In total, approximately $2 trillion in appropriation spending is made available by this law.  

Division A of this Law includes the following Titles: 

Additionally, Division B of this law outlines the funds Congress is providing to different government organizations to facilitate their response to the pandemic.  


Title I – Keeping American Workers Paid and Employed Act 

Title I, subtitled the Keeping American Workers Paid and Employed Act, expands the abilities of the Small Business Administration (SBA) to provide loans and other support to small businesses to allow these businesses to cover COVID-19 related costs. The law provides up to $349 billion in loans to be issued through June 30, 2020 to small businesses to cover expenses such as missed paychecks for employees, health insurance, rent, and utilities, with an opportunity for loan repayment deferral up to one year after June 30, 2020. Small businesses are eligible for forgiveness on these loans for costs relating to payroll, mortgages, rents, and utilities; small businesses could receive full financial forgiveness for these expenses if they do not terminate employment for any staff, but will receive less forgiveness if they do lose staff or reduce any staff person’s pay. 

The law further allows SBA to provide Express Loans (those reviewed by SBA within 36 hours) of up to $1 million per small business, an increase from $350,000. Likewise, SBA can spend up to $10 billion to issue Economic Injury Disaster Loans to most small businesses (regardless of revenues), private nonprofit organizations, and small agricultural cooperatives. For other loans issued by SBA under auspices of the Small Business Act, the law gives $17 billion to SBA to pay loan principal, interest, and fees for the next six month’s worth of loan payments. And for the next year, the law allows bankrupt small businesses to use special bankruptcy protection measures if they owe up to $7.5 million, up from $2.7 million. 

The law allocates $240 million in grants to Small Business Development Centers and Women’s Business Centers, and similarly, $10 million in grants to the Department of Commerce’s Minority Business Development Agency, for education, training, and advising programs targeted at small businesses. These training programs must focus on topics like acquiring governmental small business assistance, conducting telework, accounting for cybersecurity in telework, and mitigating the effects of COVID-19 on supply chains and product sales. 

Finally, the law allocates an additional $675 million to the SBA to cover their increased operating costs. SBA must issue implementing regulations for all these provisions by April 11, 2020. 


Title II – Assistance for American Workers, Families, and Businesses 

As the pandemic draws on and stay-at-home orders expand, a record number of individuals have applied for unemployment. Title II addresses this issue by providing states with federal funds to support their unemployment programs, modifying tax policy for individuals, and incentivizing businesses to retain employees rather than lay them off.  

To counter the stress placed on state’s unemployment programs by the ongoing health emergency, this law enables states to enter into various partnerships with the federal government to support unemployed individuals. States can enter into partnerships to take advantage of any of the following: 

  • Full federal funding of unemployment benefits for anyone laid off due to COVID-19 between January 27 and December 31 of 2020; 

  • Federally funded increase in unemployment benefits of $600 per week until July 31, 2020, provided that the state does not reduce their state-funded benefits by an equivalent amount; 

  • Full federal funding until December 31, 2020, of an individual’s first week of unemployment benefits if a state does not have a waiting period for unemployed individuals to apply for benefits; 

  • Extension of unemployment benefits by 13 weeks, funded entirely by the federal government, at the benefit rate an individual would otherwise receive; 

  • Full federal funding of a state’s short-time compensation programs, including both newly established or expanded programs, to support workers whose hours were reduced due to COVID-19; and 

  • Federally provided short-time compensation programs for states whose laws prevent establishing such programs.  

In addition to funds a state receives through any of the above agreements, the federal government will also reimburse states for unemployment benefits paid between March 13 and December 31, 2020, to government employees or those who worked for tax-exempt organizations. Similarly, the federal government will provide both logistical support (e.g., model legislation or technical support) and grants to states that want to establish or improve their short-time compensation programs, including promoting these programs and enrolling new employers for participation. Lastly, this law amends a portion of the Families First Coronavirus Response Act to allow unemployment agencies to hire temporary staff, or rehire former and retired employees, on a noncompetitive basis.  

Title II also modifies the tax code to afford some economic relief to individuals. First, individuals are provided a tax credit equal to the amount received through recovery rebates. Second, provisions in this section allow for easier access to retirement funds, such as waiving minimum distribution rules and eliminating the 10% tax penalty for early withdrawal of retirement funds (up to $100,000) in 2020. For early withdraws, if contributions are made to a retirement account within three years to replace these early withdrawal funds, then the withdraw and contribution will be treated as a rollover contribution. Additionally, this law allows for up to $300 of charitable cash donations to be deducted from a person’s adjusted gross income and eliminates the tax deduction limit for cash donations for 2020. Further, if charitable deductions in 2020 exceed a person’s tax liability, the excess can be carried over as a credit for the next year. Finally, the law allows individuals to exclude employer payments of student loans when determining their gross income, reducing overall tax burden.  

Several provisions are also included to support businesses during the pandemic. Importantly, the law offers tax credits to companies affected by coronavirus shut-down orders if the company retains and continues to pay employees rather than lay them off. Additionally, a company can defer payment of payroll taxes for its employees so long as 50% of these deferred taxes are payed by the end of 2021 and the remained paid by the end of 2022. These two provisions help offset employee costs for businesses, incentivizing worker retention rather than layoffs.  

The law also modifies how the tax code applies to business losses and tax credits for tax years beginning in 2020 in order to accommodate the unique economic conditions. The following changes are put in place: 

  • Changes the calculation for net operating losses for tax years beginning after December 31, 2020; 

  • Extends carryback timeframe for farming and insurance companies from two years to five years for tax years that begin between December 31, 2017 and January 1, 2021; 

  • Allows all companies to utilize carrybacks for tax years that begin between December 31, 2017 and January 1, 2021 with the exception of Real Estate Investment Trusts, which cannot participate in carrybacks; 

  • Removes limitations on claiming farm losses for noncorporations for tax years starting between December 31, 2017 and January 1, 2026; 

  • Eliminates the use of excess business losses from noncorporations to reduce personal tax liability for tax years starting between December 31, 2020 and January 1, 2026; 

  • Eliminates the automatic increase in tax credit limits for the alternative minimum tax for tax years beginning in 2020 and 2021; 

  • Enables companies to claim entire refundable tax credits for 2018 to prevent credit limits from being applied in subsequent tax years; 

  • Raises the cap for interest payment deductions from 30% of adjusted taxable income to 50% for tax years beginning in 2019 and 2020; and 

  • Reclassifies certain interior improvements to nonresidential real property as 15-year property for purposes of calculating depreciation deductions. 

Lastly, as supplies of hand sanitizer have all but disappeared, this law temporarily eliminates excise taxes for producing alcohol so long as that alcohol is used to produce hand sanitizer.  


Title III – Supporting America’s HealthCare System in the Fight Against Coronavirus 

Summary Coming Soon! 


Title IV – Economic Stabilization and Assistance to Severely Distressed Sectors of the US Economy 

This section focuses on providing economic assistance and relief to the air transportation industry and to other medium and large businesses that are not eligible for economic assistance under other provisions of this law, such as those in Title I. Title IV provides the Department of the Treasury with $500 billion in to distribute as loans or other financial assistance to these businesses, as well as to states, localities, territories, and tribal governments, to compensate for losses due to COVID-19. A majority of this funding ($454 billion) goes to the Federal Reserve to help stabilize the economy, such as by backstopping existing loans or providing new ones. In general, these governmental authorities to provide COVID-19 response loans will last until the end of 2020. 

In order to receive financial assistance, businesses must agree to various limitations and provisions. For instance: 

  • Businesses now have statutory-defined limits and freezes on compensation for employees earning more than $425,000 annually. 

  • Medium-sized businesses receiving support from the Federal Reserve must use the money to keep at least 90% of their workforce hired. 

  • Air carriers must maintain air service as previously scheduled, especially to low-population and remote localities so those areas can continue to receive healthcare supplies and pharmaceuticals.  

  • The President, Vice President, heads of each executive department, members of Congress, and immediate family members of all of those aforementioned people cannot be involved in financial decisions for companies seeking a loan if those individuals hold at least a 20% share of the company. 

  • Businesses receiving these loans are not required to enter into collective bargaining agreements as a condition of receiving the loan. 

The law requires the Treasury Department to conduct wide, regular, and prompt oversight and reporting of this loan program, including through online publications and testimonies to Congressional committees. To accomplish these internal reviews, the law creates a new Office of the Special Inspector General for Pandemic Recovery within the Treasury Department; this Office may provide recommendations to the Treasury Department if they identify any deficiencies in how Treasury is following the law’s provisions. The law also establishes a five-person Congressional Oversight Commission to oversee and report on the actions of the Treasury Department and the Federal Reserve in relation to these COVID-19 response measures. 

In addition to offering loans or other financial support, this section institutes various, temporary provisions to indirectly stimulate the economy, such as but not limited to: 

  • Allowing holders of federally-backed mortgages, including those on multi-family dwellings, to apply for forbearance; and offering further eviction protections to tenants in buildings where the owners have such mortgages, even if those tenants are late on rent. 

  • Removing many federally-imposed taxes on consumers for airline travel through 2020. 

  • Relaxing some standards, especially those related to offering loans, on credit unions, banks, and non-bank financial entities so as to give them more flexibility and security in providing financial assistance. 

  • Broadening the President’s power under the Defense Production Act to compel the manufacture of needed products.  

Finally, this section gives special attention to the air transportation industry. In addition to being eligible to the loans described above, the law provides $32 billion to the Treasury Department to distribute—using a financial mechanism to be decided by the Treasury Department—to passenger air carriers, cargo air carriers, and contractors directly serving passenger air carriers to ensure these companies’ employees can continue to receive wages, salaries, and benefits. As a condition of receiving these funds, these companies must promise not to furlough employees or reduce pay and benefits through September 2020; as above, they also must agree to salary freezes for employees earning more than $425,000 annually and must promise to continue regular air service as had been previously scheduled, especially to remote or small localities. 


Title V – Coronavirus Relief Funds 

This section amends the Social Security Act by inserting “Title VI- Coronavirus Relief Fund.” This relief fund appropriates $150 billion of unappropriated funds for the purpose of covering costs of necessary expenditures due to the COVID-19 public health emergency. Respectively, $3 billion, $8 billion, and $139 billion will be appropriated to territories, tribal governments, and states. The relative state population proportion, which is the state’s population divided by the total population of the US according to the most recent data collected by the Census Bureau, determines the amount of funds each state should receive. Funds distributed to territories and the District of Columbia are determined in the same way, whereas, tribal governments will be given an amount determined by the Department of the Treasury after consulting with the Department of the Interior and Indian Tribes. A unit of local government with a population greater than 500 thousand may submit a certification to directly receive funds, which would be subtracted from the total funds designated to the state the local government resides in. These entities should receive their portion of the funds within 30 days of the law's enactment. 

The Inspector General of the Treasury would monitor receipt, disbursement, and use of funds under this section. If they determine that a state, tribal government, or unit of local government has failed to comply with the definition of appropriate use of funds, they will be indebted to the federal government the amount equal to the misused funds. 


Title VI – Miscellaneous Provisions 

This section grants the US Postal Service (USPS) additional borrowing authority in order to fund operations negatively impacted by the COVID-19 emergency. The USPS may borrow up to $10 billion for operating expenses. USPS shall prioritize delivery for medical purposes and may establish temporary points of delivery to protect USPS employees and recipients of deliveries.